As Mayor Marion Barry settles into the driver's seat at the Municipal Building, it is a good time to begin to rethink Washington's melange of policies directed at housing conditions. The impressive movement of middle-income households into neighborhoods such as Capitol Hill, Logan Circle, Mount Pleasant and Adams-Morgan has contributed to the city's tax base, stimulated the economy and improved the quality of the housing supply. But, as numerous testimonies have claimed, many of the city's poor and elderly have paid the price when uprooted from their homes by evictions, rent increases and soaring property taxes. To their credit, several members of the City Council championed legislation that tried to alleviate some of the inequities coming from neighborhood reinvestment.
For example, the anti-speculation excise enacted last summer will require short-term investors to pay a tax when they buy and sell residential properties without significantly improving them. Similar to a capital-gains tax, it is designed to discourage the rapid upward bidding of prices in less affluent neighborhoods that forces many families to relocate. However, today's speculator may become tomorrow's rehabilitator (significant rehabilitation is exempt) in an effort to escape the tax. Similarly, the condominium conversion and rent-control laws, as well as the tax-relief program for elderly homeowners, provide some protection, should be more vigorously applied.
Nevertheless, their impact will be limited because they react to activities already underway in the real-estate market (speculation, rent increases, etc.). Intervention is needed before the threat of displacement becomes inevitable. occur when middle-class demand for architecturally attractive older housing is highly concentrated in particular areas and is spurred through vigorous marketing by realtors. The newcomers move into a neighborhood much faster than the existing residents want to move out. Mayor Barry should plan to reshape these market forces, rather than merely react to them.
Cities such as Boston, Hartford, Baltimore and Dayton have attempted to spread middle-class demand to several neighborhoods, thus diluting the impact on any one area. Borrowing tactics from realtors and historic-preservation organizations, they have prepared posters, newspaper ads, radio and television spots, house tours and information centers to inform potential homebuyers of lesser-known neighborhoods. Actual property transactions, however, occur through conventional private-market practices.
But, what about those families threatened with displacement who want to remain in their neighborhoods or need assistance in finding alternative housing? The rehabilitation of housing causes sharp increases in property-tax revenues due to rapid inflation in housing values. The city thereby reaps great financial gain. Last year, for example, there was a $12 million surplus in taxes. One reasonable approach is to assign some of the future increases in taxes that occur after 1978 in these neighborhoods to a special Displacement Relief Fund. These revenues could be used to provide rent supplements, down payments for home purchases, money for moving expenses and other subsidies for limited-income families forced to leave their homes due to neighborhood revitalization. All property-tax revenues below the 1978 levels, plus an increment for inflation, would continue to revert to the city's General Fund.
The Displacement Relief Fund would work similarly to the federal Highway Trust Fund. In the latter, drivers pay a tax at the gas pump that is used to finance highway construction. Those who use the highways help to pay for them. Similarly, those who benefit most from neighborhood revitalization -- middle-income homebuyers and investors -- would help to provide humane housing alternatives for those most severely disfranchised by dislocation. But the funds would come from their normal real-estate tax payments, not from a separate tax. In effect, the Displacement Relief Fund would simply earmark a portion of a renovation neighborhood's property-tax revenues. In addition, the District government could contribute a share of its federal Community Development Block Grant moneys to this program.
Only San Francisco, among all major U.S. cities, seems to share the epidemic rate of displacement that the District is now experiencing. No greater housing priority should exist in the Barry administration than the mitigation of this dilemma.